This essay describes the Banking System, that is an important part of the economic system in any country. The researcher focuses on the comparison between islamic banking and conventional banking systems in the modern society, that cannot survive without the existence of banks…
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This essay discusses the Banks, that play a crucial role in the management of money from depositors and lending money to the needy, today banks are also indispensable for and international payments system. Individuals, organizations or governments do not only need banks as safe custody of their money, but they all also need to circulate their funds like money getting transferred from buyers to sellers or employers to employees. In this case banks play a prominent role too. They handle payments like issuing personal cheques to making electronic payments of large amounts between banks. In today’s era of international trade, most payments are administered instantly. An efficiently managed system of payments is indispensable for a stable and growing economy, and any inefficiency in the payments system can hinder smooth trade and therefore can significantly hamper economic growth. In this ongoing global economic recession, the Islamic banking structure that is described in the essay is gaining increasing popularity among the non-Muslims across the world due to its broader product services and its ability to stand against the odds of economic recession where many conventional banks are collapsing. The major purpose of Islamic banking system is to manage and distribute finance in the manner that complies with the Islamic laws and principles. The growing popularity of Islamic banks among the non-Muslims is due to its “strict lending principles, reflecting industry efforts to transcend religious beliefs to gain greater market share”
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(The Differences Between Islamic Banking and Conventional Banking Essay)
“The Differences Between Islamic Banking and Conventional Banking Essay”, n.d. https://studentshare.org/macro-microeconomics/1628899-the-differences-between-islamic-banking-and-conventional-banking-system.
One of the main instruments in this branch of banking is a letter of credit (L/C). A L/C is “a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount” (Investopedia). The bank is obliged to cover the amount if the buyer is unable to make the payment, on presentation of shipping and other stipulated documents, and under specified conditions.
The principles stated in Islamic finance are very old. Islamic banking rules and regulations are based on the teachings of Islam religion. In Islam, short-selling, gambling, or uncertain money investments for abnormal profit maximisation are strictly prohibited.
This bank was brought into existence by Ahmed El Najjar’s pioneering efforts. The fundamental principal according to which this bank worked was profit sharing on the basis of Shariah’s non-interest based philosophy. It took only 13 years till 1976 for nine more banks like this to open in Egypt.
This may depend on the geographical and demographical position of the system, the social structure that surrounds it, among many other factors (Quresh, Hussain & Rehman 2012). The Islamic community dictates that things must be done differently, so that the culture and traditions of people can be maintained.
Islamic banking has been one of the less popular banking systems in the financial market. It should be noted that even though Moslems accounts for 20% of the total world, the number of Islamic banks in the globe is only a small portion relative to commercial banks.
Through the Islamic financial system there is a facilitation of services such as lending, borrowing and investing on a risk-sharing basis. The Islamic financial system can be called a value-based mechanism and the main target is to ensure “moral and material wellbeing” of the persons as well as the whole community.
, I agree to an entire electronic copy or sections of the Project to being placed on Blackboard, if deemed appropriate, to allow future students the opportunity to see examples of past Projects. I understand that if displayed on Blackboard it would be made available for no
In so doing, the Islamic principles of risk management and profit sharing are explained to help understand how Islamic banking functions without involving interest. It also examines the possibility of applying Islamic banking principles in Western economies to safeguard against
Islamic banking is based on the foundation of Islamic faith; thus, it operates within the limits of Islamic faith. Islamic banking sets forth a number of principles. These principles include the lack of